New KB Financial head expresses strong will for LIG takeover

The chief of KB Financial Group Co. on Tuesday reaffirmed his strong will to acquire a non-life insurance company, a bid the top financial regulator has delayed approving until the banking group shapes up its sloppy governance structure.
   
"I still strongly desire to take over LIG Insurance," KB Financial Chairman Yoon Jong-kyoo told reporters in a press conference at the company's Seoul headquarters.
  
"The Financial Services Commission (FSC) has to give us the final nod for the takeover, so we need to explain our situation and seek its understanding about the issue."
   
The FSC suspended the review of the acquisition bid for months due to a feud within the banking group. Insiders at the regulator said the reviewing process could extend into next year.
  
KB Financial, South Korea's second-largest financial holding company by assets, had been shaken hard by internal conflict as leaders of KB Financial and its flagship Kookmin Bank clashed over the bank's costly computation system change. 
  
The company has been seemingly on a stable track as the two leaders resigned and Yoon was named its new chairman last month.
   
Yoon said at his inauguration ceremony last week that he would do his best to attain FSC approval to buy LIG Insurance, the No. 4 non-life insurer. The company has sought FSC approval since it was picked as the preferred bidder in June.
  
"Last week, I cordially asked the financial regulator to speed up the decision on the takeover, and I still do so," he said. "I hope I will soon have a chance to meet with FSC Chairman Shin Je-yoon to talk about the issue."
   
Buying LIG Insurance has been one of KB Financial's most sought-after projects in a bid to strengthen its non-life insurance business.
   
But final approval by the FSC can be delayed for months as the regulator demands serious changes in KB Financial's governance system. The FSC said outside directors, who command a majority on the board of directors, should also take responsibility for causing the conflict between the parent firm and the bank affiliate.
  
"Although some of (KB Financial's) outside directors stepped down, we don't see that KB Financial's governing system has improved," said a high-ranking official from the FSC. "The company must prove that it made substantial efforts to reform its corporate governance."
  
As the FSC increases pressure, the chairmen of both KB Financial and Kookmin Bank's boards stepped down last week, and the boards are expected to come up with a comprehensive plan to reform the company's governance and succession program by the next shareholders meeting in March.
  

"We will see whether KB Financial has good enough governance to manage LIG Insurance properly. This is the most important point in reviewing the request. It will take time, but we will scrutinize every detail of it," said the FSC official. "The company's reform plan will be one of the references."
   
As a result, the FSC decision may be delayed until after March, when KB Financial's reform plan is scheduled to be unveiled.
   
Yoon said he is not considering further mergers and acquisitions at this moment, but is rather focusing on managing its new affiliates, including secondary lender KB Savings Bank Co. and KB Capital Co.
   
"It is more important to make new companies become fully ours. It's managerial ability to buy a company and normalize it," said Yoon. "I will focus on normalizing these companies."
   
He also said he will not enforce artificial restructuring, such as laying off workers and reducing the number of branches during his three-year term, even though KB Financial has a workforce of relatively old and high-ranking employees.
   
Shares of KB Financial closed at 39,950 won (US$35.82) on the Seoul bourse Tuesday, up 0.25 percent from the previous session.

The benchmark KOSPI edged up 0.08 percent. (Yonhap)